It is being claimed that the railways had to be
fragmented due to Directive 91/440. An examination of the privatisation debates
recorded in Hansard reveal no reference to a requirement from Brussels to fragment railways. All that was
required was that the accounts for the infrastructure be separated from those
for train operations. A simple split such as will be found under any Holding
Company would have met that requirement. The justifications for privatisation
have all been exposed as unreal by events.

Hindsight

Ex-ministers are now saying that fragmentation
was an error, but it can only be seen with the benefit of hindsight. There was
foresight in abundance if Ministers had heeded it : the Tory chairman of the
Transport Select Committee (Robert Adley), numerous backbench MPs of both major
parties, several Tory Peers, together with Opposition speakers warned of the
consequences which have come to pass.

Railway experts warned against the form of
privatisation envisaged. There were also lessons to be learned by looking at
available hindsight.

Performance

The DoT was instructed to prepare a plan for
measuring and publishing [BR] standards of per­formance". (John Major:
"The Autobiography", Page
252). Regrettably, similar action has not been initiated for industry or the UK might still
be a major supplier to the world, instead of a minor supplier in its own
backyard, and towns would have no empty shops. BR data had been published for decades in the Reports of the Consul­tative
Committees created in the 1947 Act, and picked up by the media. Conveniently,
figures for BR's competitors and industry were shrouded in mystery.

If the DfT had measured and published BR performance standards, it
would have been invaluable in establishing a meaningful objective comparison
between BR and privatised railways. Prudently, if they did measure, they did
not publish. The reality is that BR Accounts were awash with data. As there was
no published data, I remedied that deficiency in Britain’s Railways – the Reality.(see
Appendix E)

Table 1Punctuality

Train Operating

Company [TOC]

BR Business Sector

% within target

trains pa

trains within
target

TOC

BR

TOC

BR

Anglia - inter city

InterCity

77.3

90.6

23321

18027

21129

Anglia - local

Regional Rlys

85.7

90.3

70076

60055

63279

Central

Regional Rlys

74.2

90.3

404114

299853

364915

Chiltern

NSE

89.4

92.0

90654

81045

83402

Cross Country

InterCity

62.5

90.6

44742

27964

40536

GNER

InterCity

70.0

90.6

39065

27346

35393

Gatwick Express

InterCity

81.1

90.6

54035

43822

48956

Great Eastern

NSE

85.2

92.0

257937

219762

237302

Great Western

InterCity

71.6

90.6

63994

45820

57979

Island

NSE

96.7

92.0

23734

22951

21835

LTS

NSE

82.1

92.0

99518

81704

91557

Merseyrail

Regional Rlys

81.3

90.3

204157

165980

184354

Midland
Mainline

InterCity

74.2

90.6

44771

33220

40563

Northern Spirit

Regional Rlys

75.7

90.3

452033

342189

408186

North Western

Regional Rlys

78.6

90.3

474776

373174

428723

Scotrail

Regional Rlys

82.2

90.3

602449

495213

544011

Silverlink

NSE

82.9

92.0

202961

168255

186724

South Central

NSE

77.6

92.0

575226

446375

529208

South East

NSE

80.2

92.0

558866

448211

514157

South West

NSE

69.9

92.0

546583

382062

502856

Thameslink

NSE

71.8

92.0

156308

112229

143803

Thames Trains

NSE

80.2

92.0

267686

214684

246271

Wales & Borders

Regional Rlys

78.6

90.3

83494

65626

75395

WAGN

NSE

74.8

92.0

328148

245455

301896

West Coast

InterCity

68.7

90.6

59237

40696

53669

Totals

5727885

4461718

5226099

% punctuality

77.9

91.2

Punctuality targets are on the same basis. Inter City within
ten minutes, the rest within five.

The number of trains pa are those shown for the companies
in the SRA Report

The targets and actual percentage of trains within target
are from the BRB & SRA Reports

Statistics for privatised railways would be
even worse had they held a similar proportion of connections as BR did.

"In most of our Region,
competition does not exist. Some are reluctant to hold a train for a few
minutes so pas­sengers from a late running connection can make it. Missing
out stops to avoid a train being late at destination is not unknown. Who is
going to pay for big investment suggested by train companies? Are they prepared
to gamble on there not being a downturn in the economy in the next 20 years?
Not one of the toilets was working - they stank to high heaven, and are a
health risk. In some cases, companies are adamant that they would not
compensate. Off peak fares are not regu­lated and have been raised by
Connex to double the inflation rate. There is a trend for smaller seats in new
rolling stock, even though people are getting fatter. (RUCC South 1998/9
Report, Page 39). Given the policy of breaking connections, lengthening journey
times, missing calls to recover delays and not making extra calls to replace a
can­celled train, punc­tuality should eclipse BR's.

Operators said, we are entitled
to miss calls to make up time! (Sunday Telegraph 13.1.02). The phone would have
been hot from Whitehall
had BR done that.

In October, 1995, the "Today" newspaper quoted an MP, who
rejected criticisms of con­nections broken in the new era, saying that
trains held for connections multiply delay. It showed how little politicians
knew about railways. BR managers had known of the potential for delay since
"Adam was a lad", which
they addressed by specifying "Connectional
margins" - the maximum - say five minutes - which selected trains can
be held for a delayed arrival, but only
if it is known an incoming train will arrive, connection be made and the
train leave within the margin. If it is forecast that connection cannot be made
within that margin, the forward train must depart without waiting. Some trains
were held, but for good reasons some had no margin and had to depart without
waiting for delayed arrivals. Margins were determined so as to ensure that a
delayed con­nection would not cause delay to other trains into which it was
required to make connection en route. This avoided the snowball effect which
the MP appeared to assume was overlooked by experi­enced BR managers.

From 1948, BR had punctuality
targets for passenger services, and for fast freight services. They were
progressively lifted. Originally, they were for internal use only. District
Officers had to explain delays on daily telephone conferences, and were
required to take action to avoid repetition. Targets and achievements were set
out in Annual Reports that were supplied to Watchdogs and the media. Watchdogs
and politicians thought it would be useful for BR to set an example to other
businesses and industry that did not publish any per­formance nor
complaints data. It led to the Citi­zens Charter, which focused on rail
travel - the micro area of public expenditure - instead of the macro areas -
such as mortgages, cars, insurance, etc. These far more important areas - not
to mention, BR's competi­tors: air, sea, and road - have still to respond
to political vision by following BR's exam­ple.

Complaints

In 1983, BR complaints
totalled 63,000 - a staggering figure - until related to total passengers, when
it became apparent, that 99.991% were not
complaining. Watchdogs never made this calculation - until privatised railways were praised for having 99.885%
passengers not complaining. (North East RUCC 1997/8). This is worse than BR. Since
1997/8, complaints increased to 1% or more.As it seemed likely that some of the
0.009% who complained had been given redress, I decided to examine complaints
files to ascer­tain to what extent BR had redressed complaints, and found
that staff were categorising as com­plaints, letters that were not
complaints about BR services, representing 33% of total "complaints".
(see Britain’s Railways – the Reality, Table
6). Files revealed that 55% of the balance were given refunds; and others an
apology or explanation - all deemed to redress a private sector complaint. Some
9% of letters of complaint to BR also included praise or thanks for some
particular act. TUCC files revealed that, in 1983, only 1,800 [2.8%] were
dissatisfied with BR's reply, and took up their complaint with TUCCs, which had
been publicising their complaints role.

Subsidies

The
new boys & Government have ignored the old adage that: “turnover is
vanity, profit is sanity”. In BR, we tried to achieve this against all
the odds: political interference in pricing, closures, investment and
day-to-day operations. The new boys – actively encouraged by Government -
& given a virtually free rein, have made a mad dash for turnover & find
they cannot manage without massive doses of subsidy.

Subsidies
to the private sector are unjustified. They were supposed to show how to manage
with­out a subsidy and keep fares
below inflation! BR fares were below inflation for 39 years, (see Fares). In April 1996, the Minister of Transport stated
that "two thirds of services were franchised for one third of the subsidy
paid to BR". Unable to get a reply from the Dept of Transport, inquiries
of Tory Central Office estab­lished that "two thirds was calculated on
the basis of passenger revenue". OPRAF data showed, that as at October
1996, on that basis, one-half had by then been franchised. The subsidy to franchisees of £567m
was 4.9% more than the net subsidy BR
was paid in 1994/5, after deducting the unwar­ranted administrative profit of 20.3%, which had never been paid before,
see Table 2 below. (The introduction of a
"profit" element was revealed in letters from OPRAF and the BRB).The aver­age
BR fare was 12p per mile, franchised fares aver­aged 12.5p per mile - 9.6%
higher than un­franchised at 11.4p per mile, see Table 2. This higher fare
level called for initial subsidies to be 10% less than BR! Attractive services were hived off first rather than
the challenging rural areas. Eleven of the thirteen services, which received
84% of the total subsidy, were profitable under BR! When all services were
franchised, the total subsidy was double that paid to BR in 1993/4:

"Railtrack
plc was created 1st April 1994. Within BR, 70 business units were created with
re­sponsibility for train operations, rolling stock, and other services.
Each business unit charges prices calculated to enable it to be a self
sustaining commercial enterprise, earning profits to fund investment and a
return for shareholders. This led to much higher charges attributed to them
than while BR was a single entity. Most notable was the price paid by operators
to Rail­track for access to the infrastructure and rolling stock companies
for leasing trains. As a result, Govern­ment paid much higher grants.
Previously, the PSO was paid for the statutory obligation to provide
loss-making services for social reasons. In 1994/5, the payment was £1,748m in place of the former
PSO of £930m. In addition,
grants from PTEs increased to £342m, more
than double the previous year's payments. (BRB Report, 1994/5, Page 5).

"The
industry starts off with a much greater level of funding than provided to BR in
the final years of the previous financial system. Government has specified much
more clearly than ever before what non commercial services it requires the
industry to provide". (BRB 1995/6 Report, Page 6).

Had
BR not been about to be privatised, Government would not have doubled the PSO to facili­tate a split into 70, even
had BR argued that it would improve services and increase traffic. The 1994/5
subsidy would have fallen below that of 1993/4. The theory was that the average
for the franchise period would be less than the hugely increased and artificial
subsidy to BR. £1 paid now is worth more than £1 paid in 15 years
time! There was an assumption that anyone bidding for a lapsed franchise would
make a bargain bid, when they would want to start back at "GO", and
collect their £200m. In 1993, I
forecast ("Blueprints for Bankruptcy"),
that, if franchi­sees cannot operate profitably with a reduced sub­sidy,
or are wound up, the state will be called on to run trains, or a higher subsidy
paid. This has happened - Arriva had an increase of £60m in the subsidy;
ScotRail [1] and Central got an extra £56m between them; Connex SouthEast
was given an extra £58m to stave off bank­ruptcy for one year. GB
Railways received an extra £24m subsidy in 2002 to keep it afloat until
the franchise ends in 2004. Other companies seek "re-nego­tiation of
subsidies". "Railtrack received £732m in Grants from Gov­ernment,
in the first year of its funding cycle with four more to go. Its profit for the
year was £292m. It cannot survive without Government handouts".
(Times 19.12.01). Prior to privatisation, it was stated that Railtrack would
receive no subsidy, but would be
financed by access charges paid by train companies. (Select Commit­tee on
Transport, 4th Report, March 1995). "The new railway has had to receive
twice the subsidy of the old one, despite business rising by more than a
third". (Times 16.1.02). "All former Regional Railways franchises
have now received extra funding compared to the original deal". ("Modern Railways", April 2002, Page
5).

As
if the bigger subsidy was not enough, rolling stock and infrastructure were
sold for less than their value. The sale of rolling stock was completed in
early 1996 for £1.8bn. Some was re-sold for a 56% profit within eight
months. By the end of 1997, all had been re-sold for £2.7bn - a 50%
profit on a depreciated asset, as no new stock had been acquired, proving that
stock was not "decrepit" as some operators claimed to explain away
their worsening performance. Some media reports claimed that assets were under
priced due to fear of re-nationalisation, which pre-supposes that the Tories
expected to lose an election in four years' time, of which the media carried no
forecast. The flotation of Railtrack cost the taxpayer £6bn. A Select
Committee criticised the last Tory Government and its civil servants. The
Treasury raised £2bn from the sale. Railtrack's share value quadrupled to
£8bn. Government made the mistake of selling 100% of the shares in one
sale, instead of testing the market value by selling them in stages. Advisors
said that it was the first time a Government had sold a company dependent on a
subsidy of around £1.8bn a year. (Public Accounts Committee Report No 24,
1999).

Government
claimed it cut the subsidy paid to BR, by offsetting against subsidies, capital
from the sale of rolling stock companies. This seems to be the classic error of
mixing capital and revenue. They had stopped BR from leasing stock in 1971, or
there would have been less stock to sell.

The
Institute of Directors said that "3,000 miles of
branch lines should be closed, diverting sub­sidies to main lines".
Audited BR Accounts show that InterCity received no subsidy from 1988, and NSE
none in the year before privatisation. Only rural and provincial commuter
routes had sub­sidies. Had 3,000 miles of branch lines not existed, BR
would have had no subsidy. In the last year under BR, Government - without
precedent - changed the basis and doubled the subsidy. No main lines should
have had a subsidy! The SRA said some [subsidised] services are of
"dubious economic value", (Policy Statement, Page 9), signalling an
intention to close them. Clearly the goalposts have been moved. BR, with a
lower subsidy, was directed not to reduce the system.

Table 2Comparison of BR & Franchisees' subsidies - October 1996

Franchisee/

Data supplied by
OPRAF

BR subsidy 1995/6

BR Business Sector

revenue

passenger miles

subsidy

Total

"Profit"

£m 1

(millions) 1

£m

£m

£m 2

Anglia

34.0

300.0

Cross Country

102.0

1,128.0

East Coast *

217.0

1,900.0

64.6

66.2

18.4

Gatwick Express

27.0

96.0

-4.6

-3.1

3.1

Great Western *

156.0

1,200.0

53.2

61.8

14.5

Midland
Mainline *

58.0

442.0

16.5

14.5

5.9

West Coast

216.0

1,815.0

InterCity3

810.0

6,881.0

129.7

139.4

41.9

Chiltern

22.0

161.0

16.5

17.3

2.3

Great Eastern

109.0

855.0

Island

0.8

4.0

2.0

2.5

0.1

LTS *

53.0

423.0

29.5

32.1

4.1

Network South Cen *

158.0

1,300.0

85.3

94.5

13.7

North London

55.0

439.0

South East

215.0

1,548.0

125.4

142.9

18.0

South West

221.0

1,800.0

54.7

83.4

19.9

Thameslink

65.0

455.0

Thames Trains

46.0

376.0

33.2

42.0

4.7

West Anglia

107.0

729.0

Network SouthEast3

1,051.8

8,090.0

346.6

414.7

62.8

Cardiff

5.7

52.0

19.9

21.4

0.7

Central

60.0

601.0

Merseyrail

19.0

147.0

North East

61.0

692.0

North West

44.0

377.0

Scotrail

86.0

851.0

Wales & West

40.0

412.0

70.9

74.9

4.4

Regional Railways

315.7

3,132.0

90.8

96.3

5.1

Totals

2,177.5

18,103.0

567.1

650.4

109.8

Less "Profit"

-109.8

Net

567.1

540.6

Franchised

1,219.5

9,714.0

% franchised

56.0

53.7

This is the halfway
house - with about half of the train companies privatised.

1Revenue & passenger miles are 1994/5 except where shown * which
were 1993-4

2 A
"profit" wasnew.
Hitherto, a subsidy was the forecast deficit. Beforeprivatisation the subsidy to BR was
doubled as a result of fragmentation.

3 Inter City received no subsidy after
1988. NSE received no subsidy in 1993/4

[1]They won
the franchise in 1997 with a subsidy of £288m pa, to fall to £202m
by the end of the contract. They said the franchise is not a commercial
operation, unless you strip out a whole lot of routes. They cannot operate on
the present subsidy if the current service is to be maintained. (Sunday Times
20.1.02).The subsidy covered all services.